New report reveals profiteers in SA energy crisis

‘Our attempt in this report in particular is just to reinvigorate that conversation and shine the light on all of the actors, both private and public, who are in this space and are, again, positioning themselves to make a lot of money,’ says Michael Marchant, head of investigations at Open Secrets.

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JEREMY MAGGS: The organisation Open Secrets has launched its latest report entitled, Who Has The Power? South Africa’s Energy Profiteers. The report in its investigating South Africa’s energy sector and climate crisis shines a light on the private sector interests and who seeks to profit from South Africa’s current energy crisis, as well as the much-vaunted proposed energy transition.

Let’s lead the programme with Michael Marchant, who is head of investigation at Open Secrets. First of all, Michael, can you elaborate on that term energy profiteers?

MICHAEL MARCHANT: That’s a great place to start, Jeremy. So an energy profiteer from our perspective, they’re the private actors, the corporations and the middlemen who are lining up to make a mint out of South Africa’s energy crisis.

I think that the way we view it is that those energy profiteers are lining up across different sectors. They’re in the coal sector, they’re in oil and gas, but also increasingly I think they’re positioning themselves in the renewable sector as well.

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JEREMY MAGGS: So where do they sit in the supply chain and what do they do?

MICHAEL MARCHANT: We’re looking predominantly here at the large-scale suppliers to Eskom in the case of coal, but also in the case of oil and gas and renewables, you’re looking at a range of different actors. So predominantly looking at large multinationals who have lined up and gained access to exploration rights, particularly increasingly production rights off the coast of South Africa.

In the case of renewables, largely private companies, often those who are headquartered overseas, that are pitching and often benefiting from the Renewable Energy Independent Power Producer Programme (REIPPP).

JEREMY MAGGS: Explain to me why it’s important to identify them.

MICHAEL MARCHANT: So I think it’s important to identify them because South Africa faces this multifaceted crisis. Everyone obviously understands that we’re in an energy crisis. We are living through hours of load shedding every day. But at the same time, we are facing increased risks from environmental degradation and also climate change, extreme weather events. At the same time, we face this sluggish economy.

So this question about how we address those issues at the same time, how we address the energy crisis in a way that’s just and equitable is really I think one of the central and fundamental questions that South Africa has to face in the immediate term. Our analysis, I think very often gets stuck, and this is understandable, on Eskom as a state-owned entity and its decline and its erosion.

What can sometimes happen, I think, in that space is that we start to ignore many of the private actors who see the crisis as an opportunity to make a lot of money and often doing so in ways that are not going to address the crisis.

So our attempt in this report in particular is just to reinvigorate that conversation and shine the light on all of the actors, both private and public, who are in this space and are, again, positioning themselves to make a lot of money, often in ways that are not helpful to addressing the very real crises that the country is facing.

JEREMY MAGGS: Michael, working in ways that are not going to address the crisis… Are you suggesting that they just add a burden to the process or is there an element of alleged malfeasance here?

MICHAEL MARCHANT: I think that there’s very real risk that we’re going to see malfeasance, and this report is not one that identifies in many instances over examples of corruption, although we have seen those very much in the energy space over the last two decades. The scandals of PetroSA are very good examples of this. But I think if you see the way in which the Department of Mineral Resources and Energy (DMRE), for example, is pushing oil and gas exploration and the companies that are really positioning themselves in that space, is that increasingly we see it done in a way that only makes sense in terms of the amount of profit and potential corruption that can come out of that.

This is a global experience… that one of the key sources of reluctance and rejection of renewable energy is because there is so much short-term money to be made in fossil fuels, oil and gas in particular, much of that money comes from economic malfeasance and corruption. So we’ve seen that over many decades.

But I think what the report is also saying is that there’s a moment here and the next ten, 15 years are going to be incredibly telling because if there is the kind of wide scale investment in oil and gas that, for example, Gwede Mantashe is pushing, it’s opening the country up to a great deal of risk when it comes to those types of corrupt scandals.

JEREMY MAGGS: Michael, the sceptic might turn around and say that we need them because they are meeting a need.

MICHAEL MARCHANT: This is a question that we have to grapple with, but I think what we have to do is we have to deal with the evidence, which is changing every day. If we look at the National Development Plan (NDP) that was published about a decade ago now, it calls for investment in oil and gas, predominantly because at that time, ten, 15 years ago, the costs of renewable energy were very different.

So there was this notion that to meet the energy needs, and again, the crisis is used to justify this, that we have to do those things, we have to invest in oil and gas.

I think increasingly the independent evidence coming out is that that is rapidly changing and has changed. The cost calculus is very different. So this is no longer I think a question of environmentalists raising concerns solely about the impact of oil and gas on the environment, which is devastating, but increasingly there are just concerns that economically this does not make sense that we run huge risks of ending up with massive stranded assets in a way that doesn’t truly address the energy needs, let alone the kind of socioeconomic needs.

So I think what the report also tries to do is bring together that evidence from multiple forums, concerns about environmental and social issues, but also the economic case. I think what that shows, is that has increasingly changed.

JEREMY MAGGS: Who are some of the main players that you’ve identified?

MICHAEL MARCHANT: So what we’ve tried to do is, again, we’ve tried to identify the actors in the public and the private sphere. From government’s perspective, there are two very clear players here. The one is Gwede Mantashe, the Minister of Mineral Resources and Energy and the DMRE. The reason for that is that that’s the central entity in government that is pushing for this type of large-scale new investment in fossil fuels.

I think the other is PetroSA and in particular this proposal to build a new national petroleum company.

In terms of the corporations, what we see is it’s really the usual suspects. If we look at our offshore oil and gas, for example, we’re looking at large multinational companies like Total and Shell. From a domestic perspective, Hosken Consolidated Investments (HCI) has a huge amount of investment in offshore oil and gas.

In terms of coal, it’s really Exxaro and Seriti, two coal companies that have really consolidated their interests in coal.

It’s slightly different when we look at the renewable energy space and we look at a lot of multinational firms like Enel Green Power. The last thing I’ll say on this is that what’s also, of course, interesting to note is that there are many companies that are trying to position themselves to benefit from both sides of this coin.

So companies like Exxaro and Seriti, the two largest suppliers of coal to Eskom, have very large green parts of their companies that are investing in renewables, and so of course many of those companies are positioning themselves to benefit.

JEREMY MAGGS: Is there a suggestion that there is personal profit taking?

MICHAEL MARCHANT: Well, there’s certainly evidence that there’s been personal profit taking from parts of the state over the last 20 years. I mentioned earlier the example of PetroSA, and I think it’s a very good one, is that we know due to the work of investigative journalists for 20 years now, as early as 2005, that PetroSA has been involved in providing kickbacks to contractors that supply oil and that there’s been a great deal of corruption in the deals that it’s been involved with around the continent, and of course in PetroSA’s case there’s always the risk that that money is then funnelled back to the ANC.

We’ve seen that as well, that there’s been a party funding element to that. Of course, the other areas in which there’s money and politics comes in the form of donations to individuals. We know, for example, that the CEO of Seriti Resources, Mike Teke, was a large donor to Cyril Ramaphosa’s campaign. Now they’ve dismissed that as being irrelevant, as some kind of personal relationship. But there is certainly a great deal, I think, of money and influence that these companies and individual executives often bring into the public space.

JEREMY MAGGS: Michael Marchant from Open Secrets, thank you very much indeed.

William Murphy

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